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June 2003 - If Juan made a mistake, do you blame Pedro?

If Juan made a mistake, do you blame Pedro?

☳ by Adam Aspilla

If you blame somebody who did not do anything wrong against you, you are like blaming Pedro for the fault of Juan. Similarly, if you purchased a car from a dealer and financed by a bank, you will not blame the bank for the factory defect of a car you purchased. The right thing to do is to go back to the dealer and let the dealer fix the problem.

In buying an item on credit, the dealer sells the product to a customer and the balance of the purchase price after a down payment is financed by a bank or fi-nance company, unless a dealer has an in-house financing (self financing).

Upon approval of your credit application, you are required to sign a promissory note and other related documents in favor of a lender. Included in the documents you signed is a “chattel mortgage” whereby you consented that the item you purchased is used as a collateral (security) of the amount you borrowed. In case you default on your payment, the lender could seize the item you purchased.

Upon completion of paper work the item will be delivered to you. The dealer/manufacturer has the responsibility to make good of its warranty on the product you bought, while you are responsible to pay your monthly payment to the lender.

Whether the item you purchased is defective or not, you are required to continue your monthly payment to the lender for the lender has nothing to do with the defective product for it is the re-sponsibility of the dealer/ manufacturer. If you stop your payment to the lender because you are not happy of the performance of the item you purchased, three things will happen to you: your credit rating will be ruined, you will lose the item you purchased for the lender will seize and sell it at a public auction, and the worst part is you are required to pay whatever is the deficiency (the difference between the balance of your loan and proceeds of sale of the item seized by the lender).

A good example was a man who came to my office looking for an answer why his car was seized by the lender when according to him he had a valid reason for withholding his payments because the dealer where he purchased his car did not fix the car according to his satisfaction. As a result, his wage was garnished and his credit rating went down the drain, this is in addition to losing his car.

The foregoing example is an illustration of blaming the wrong party (blaming Pedro of Juan’s fault). The man should have pressured the dealer or the manufacturer to honor the warranty and not blame the lender that has nothing to do with the performance of the car. His wrong course of action caused his own troubles.

A recourse to the above scenario is not to suspend the payments to the lender, but to pressure the dealer/manufacturer to fulfill its obligation under the warranty. If it does not work, advise the dealer that you are to report the matter to the lender.

Once reported, the lender may blacklist the dealer by not providing financing to its future customers. To institute legal action is a last resort.

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.